Search Climate Insights Directory

The report analyzes the extensive subsidy framework for biofuels in the EU, estimating total transfers at approximately €3.7 billion in 2006. It identifies excise tax exemptions as the primary support mechanism and argues that current subsidies for first-generation biofuels are an expensive and inefficient way to reduce CO2 emissions compared to purchasing carbon offsets. The authors recommend eliminating ethanol tariffs, resisting new blending mandates, and shifting focus toward second-generation biofuels.

The report finds that U.S. government support for biofuels is extensive and inefficient, with total subsidies projected to exceed $92 billion between 2006 and 2012. The largest contributors are volumetric excise tax credits and market price supports driven by renewable fuel mandates. The analysis argues that these subsidies are an expensive way to achieve energy security and greenhouse gas (GHG) reductions, noting that the cost per tonne of CO2-equivalent displaced is significantly higher than purchasing carbon offsets on climate exchanges. The report warns that pending legislation, such as the Renewable Fuels Standard, could further increase these costs, potentially exceeding $130 billion per year by 2030.

The report analyzes the extensive network of U.S. government subsidies for liquid biofuels, finding that support is pervasive across the entire supply chain. It estimates that annualized subsidies for ethanol range between $6.3 and $8.7 billion, while biodiesel support ranges from $1.7 to $2.3 billion. The author argues that these subsidies are often inefficient, particularly in terms of greenhouse gas mitigation and fossil fuel displacement, and warns that the rapid growth of the industry—driven by these incentives—may be unsustainable.